Goodwill Bounces Back

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Goodwill impairments for publicly traded companies in the United States fell by more than 80% from 2008 to 2009, according to a new study by financial advisory firm Duff & Phelps and the Financial Executives Research Foundation.

The total amount of goodwill impaired fell to $26 billion from a record $188 billion in 2008, when the financial crisis and stock-market plunge forced hundreds of companies to take charges, particularly in the consumer-discretionary, energy, and financial-services sectors. The study’s results are in line with those of a similar report released by KPMG earlier this year. (Goodwill is the amount paid for an acquisition in excess of its fair value.)

The number of goodwill impairments should continue to decline, says Gary Roland, managing director in the office of professional practice at Duff & Phelps. “The market capitalization of most companies having improved should decrease the number and magnitude of impairments,” he says. “Also, there were a significant number of impairments already taken, so companies have cleaned house a little bit. That should reduce the number going forward.”

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Financial-services firms still wrote down a significant amount of goodwill in 2009, recording by far the largest dollar value of goodwill impairment of any industry, with $10.7 billion worth of goodwill impaired. The industrial sector followed with just $5.3 billion.